THE EVOLUTION OF THE PERSONAL PROPERTY REGISTRY 45

THE EVOLUTION OF THE PERSONAL PROPERTY REGISTRY:CENTRALIZATION, COMPUTERIZATION,

PRIVATIZATION AND BEYOND

RODERICK J. WOOD'

This article traces the evolution of the personalproperty registry in Alberta from the decentralizedregime of the chattel security registry which waspresent prior to 1922, through the establishment ofthe centralized Corporate Mortgage Registry,Vehicle Registry and Central Registry, up to thepresent-day Personal Property Registry.Technological advances in computers andtelecommunications, coupled with the prospectivethinking of legislators, enabled the registry systemto lead the way with innovative and efficient modesof registration and searching procedures. However,now that some registry services have beenprivatized, the author questions whether the impetusto continue providing improvements in the registrysystem have disappeared.

Le present article relate l'histoire del'enregistrement des sAirets mobilijres en Alberta- du rigime ddcentralisi des Chattel SecurityRegistries en vigueur jusqu'en 1922, jusqu 'dl'6tablissement du bureau centralisd deshypothiques, du bureau des vdhicules automobileset du bureau central denregistrement, pour aboutirau bureau d'enregistrement des sAretds mobilidresactuel. Grdce aux progrds technologiques, 6ilinformatisation et aux tdldcommunications, ainsiqu'i la vision prospective des ldgislateurs, lesmodalitds d'enregistrement et les procddures derecherche sont dsormais innovatrices et efficaces.Cependant, suite 6 la privatisation de certainsservices, I'auteur se demande si I'incitation dpoursuivre les amiliorations a disparu.

TABLE OF CONTENTS

INTRODUCTION ................................... 45TIHE CHATTEL SECURITY REGISTRY CIRCA 1921 ........ 46CENTRALIZATION OF THE REGISTRIES ................ 48A. THE CORPORATE MORTGAGE REGISTRY ........... 48B. THE VEHICLE REGISTRY ...........C. THE CENTRAL REGISTRY ...........

IV. COMPUTERIZATION AND CONSOLIDATIONOF THE REGISTRIES ...................

V. THE MOVE TOWARDS A PAPERLESSREGISTRY SYSTEM ...................

VI. PRIVATIZATION OF THE REGISTRY ......VII. THE FUTURE OF THE PERSONAL

PROPERTY REGISTRY .................

............. 50

............. 5 1

.............52

.............53

............. 55

........ ..... 56

I. INTRODUCTION

It is widely recognized that the Personal Property Security Act' revolutionizedchattel security law in Alberta. The PPSA is a Canadian version of Article 9 of theUniform Commercial Code of the United States. The genius of Article 9 lies in itsinsight that it is unnecessary to maintain several separate categories of security interests.

Associate Professor, Faculty of Law, University of Alberta. I wish to thank Geoff Ho and MichelleTurlock for helping me comprehend the pre-PPSA history of the registry and Bill Hurlburt for hishelp on the privatization debate. The opinions expressed in this article are solely my own.S.A. 1988, c. P-4.05 [hereinafter PPSA].

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Instead, a unified concept of security interest was created and made subject to a singleset of rules and principles. What is less well appreciated is that the personal propertyregistry systems in Canada bear little resemblance to the comparatively primitiveregistry systems that are presently found in the United States.2 The genius of Canadianpersonal property security law lies in the sophistication of its registry systems.

This technical expertise in the design of personal property registry systems was notsomething that developed overnight in Alberta. It was a product of a long-standingwillingness to experiment and innovate. In some cases, the impetus for change was anew advance in information technology, such as the computer, which permitted a moreefficient entry and manipulation of information contained in the registry. At other times,the re-engineering of the registry was in response to some new external factor, such asthe proliferation of the automobile. More recently, an ideological element has beenintroduced with the privatization of the registry. This article will trace the remarkableevolution of the personal property registry in Alberta over the past seventy-five years.

II. THE CHATTEL SECURITY REGISTRY CIRCA 1921

A relatively simple registry system existed in 1921. There were two registrationstatutes that governed chattel security. The Bills of Sale Ordinance3 created aregistration requirement in relation to chattel mortgages. The Conditional SalesOrdinance4 created a registration requirement that applied to conditional salesagreements and hire receipts. The registry system that existed in 1921 was based uponan old and familiar system that was first enacted in 1881. 5 The province was dividedinto eleven different registration districts,6 and a registration clerk was appointed foreach district. The clerk numbered each instrument submitted for registration and enteredthe names of the parties in alphabetical order into a book. It cost fifty cents to registerand twenty-five cents for each search.7 Obtaining copies of registered documents wasa labour intensive activity which commanded a fee of ten cents for every hundredwords transcribed.

2 For a review of some of the problems with the United States registries, see E.S. Adams & S.H.

Nickles, "Mending the Article Nine Filing System to Meet Current Deficiencies" (1994) 59 Mo.L. Rev. 833; E.S. Adams et al., "A Revised Filing System: Recommendations and Innovations"(1995) 79 Minn. L. Rev. 663 at 889-910. Many of the innovative features found in the CanadianPPSA registry systems are currently being considered in connection with the next revision ofArticle 9.

3 C.O.N.W.T. 1898, c. 43. The Ordinances were renamed as Acts in 1922 when the first RevisedStatutes of Alberta was passed.

4 C.O.N.W.T. 1898, c. 44.5 An Ordinance respecting Mortgages and Sales of Personal Property, O.N.W.T. 1881, No., 5. A

registration requirement was imposed upon conditional sales agreements in 1889. See AnOrdinance respecting Receipt Notes, Hire Receipts and Orders for Chattels, O.N.W.T. 1889, No.8. As the West was developed, new registration districts were carved out of the eight districtswhich originally covered the territory which now comprises Alberta and Saskatchewan.

6 Registry districts were established in Athabasca, Edmonton, Wetaskiwin, Red Deer, Stettler,Calgary, Bassano, Medicine Hat, McLeod, Lethbridge and Taber.Supra note 3, s. 33, as am. by S.A. 1916, c. 3, s. 36.

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THE EVOLUTION OF THE PERSONAL PROPERTY REGISTRY 47

Assignments of book debts were not required to be registered under provincial lawin 1921. This was soon to change. The federal government had in 1919 enacted federalbankruptcy legislation after a curious thirty-nine year abandonment of the field." TheBankruptcy Act provided that a general assignment of book debts was void against thetrustee in bankruptcy unless it was registered in accordance with provincial law. 9 In1922 The Bills of Sale Ordinance was amended so as to require registration of such

assignrents.'" In 1929, the province enacted The Assignment of Book Debts Act." This

statute worked out the rules governing assignments in greater detail, but did not alterthe requirement that assignments of book debts be registered in the registration districtin which the debtor was located.

This did not entirely cover the field. There was, at the time, considerable uncertaintyas to what kinds of secured corporate debt instruments were required to be registeredunder The Bills of Sale Ordinance. Chattel mortgages granted by companies were

undoubtedly registerable. 2 It was also accepted that floating charge debentures were not

required to be registered. 3 However, there were many other kinds of corporate

securities, such as mortgages under trust indentures and debentures creating fixed

charges, which produced a difficult and obscure case law on the scope of the bills ofsale legislation. 4

The registry, as it existed in 1921, might be described as a unified but decentralizedsystem. It was unified in the sense that for each registry district there was a singleregistry that an interested party could search in order to determine if goods or chattelswere encumbered. Chattel mortgages and conditional sales agreements (and assignmentsof book debts in the following year) were all registered at the same office. It was

decentralized in that the search would only reveal registrations pertaining to thatparticular registration district.

The problem with a decentralized (or local) system is that it frequently becomes

necessary to conduct multiple registrations and searches, particularly where mobile

goods are involved. A decentralized registry system also necessitates a set of rules thatwill govern when chattels are moved from one registration district to another. Under

the registration statutes, a secured party was required to file a certified copy of the

See Report of the Study Committee on Bankruptcy and Insolvency (1970) at para. 1.2.02 to 1.2.08.

S.C. 1919, c. 36, s. 30.D S.A. 1922, c. 50, s. 4.

S.A. 1929, c. 8.21 Capital Trust Corp. v. Yellowhead Pass Coal & Coke Co. (1918), 10 W.W.R. 1192 (Alta.

S.C.T.D.).13 Johnston v. Wade (1909), 17 O.L.R. 372 (Ont. C.A.).14 Imperial Canadian Trust Co. v. Wood, Valance & Adams, Ltd. (1915), 9 W.W.R. 44 (Alta.

S.C.T.D.) (mortgage to secure issue of future debentures not within scope of bills of sale

legislation); Foster v. International Typesetting Machine Co., [1920] 2 W.W.R. 697 (S.C.C.) (fixed

charge securing debentures within scope of bills of sale legislation). Matters were further confused

in Gordon Mackay & Co. v. Capital Trust Co., [1927] S.C.R. 374 when the Supreme Court of

Canada held that, contrary to the conventional view, a floating charge was registerable under the

bills of sale legislation.

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document in the registration district into which the chattels were permanentlyremoved. 5 A failure to do so within thirty days of learning of the removal invalidatedthe security interest. Similarly, registration of a security agreement in the wrongregistration district rendered it void. 6

An exception was made in the case of conditional sales agreements covering rollingstock and equipment for use on railways. Security agreements covering such equipmentcould be registered in the office of the Registrar of Joint Stock Companies. " If thiswere done, no other registration or renewal was required and the security agreementwas valid and effectual as if it. had been registered in accordance with the chattelsecurity legislation. This eliminated the need for multiple registrations in the case ofrolling stock, which, by its nature, had a habit of migrating across registration districtboundaries.

III. CENTRALIZATION OF THE REGISTRIES

A significant re-configuration of the registries occurred between 1922 and 1966. Twonew registries were created during this period, namely, the corporate mortgage registryand the vehicle registry. The creation of new registries might seem to suggest amovement away from a centralized registry system. In reality, the opposite was true.The new registries were early experiments in the design of centralized registry systems.The original decentralized registry system (the chattel security registry) with its elevenregistration districts was retained, but certain types of registrations were hived off andmade subject to a separate centralized system of registration. The new registry systemspermitted registering parties to effect a single registration in order to perfect a securityinterest throughout the province. Although this piecemeal approach represented a moveto greater centralization, it resulted in the abandonment of the concept of a unifiedregistry system. This process culminated in 1966 with the centralization of the chattelsecurity registry. The net result was that in 1966 there were three separate, centralizedregistry systems.

A. THE CORPORATE MORTGAGE REGISTRY

The corporate mortgage registry was established in 1922.18 All mortgages andcharges created by a company were required to be filed with the Registrar ofCompanies. 9 The corporate mortgage registry was a central registry in that there was

15 The Bills of Sale Ordinance, O.N.W.T. 1898, c. 43, s. 29; The Conditional Sales Ordinance,O.N.W.T. 1898, c. 44, as am. by S.A. 1920, c. 4, s. 8.

16 Capital Trust Corp. v. Yellowhead Pass Coal & Coke Co., supra note 12.17 The Conditional Sales Ordinance, O.N.W.T. 1898, c. 44, as am. by S.A. 1909, c. 4, s. 3. In 1965,

the Conditional Sales Act, R.S.A. 1955, c. 54, s. 10 was amended so as to adopt the vehicleregistry as the place for registration of conditional sales agreements of rolling stock. See S.A.1965, c. 15, s. 2.

8 The Companies Act, R.S.A. 1922, c. 156, ss. 107-10. Prior to this, the companies statutes provideda requirement that the company keep a registry of mortgages which its creditors had a right toinspect. See The Companies Act, O.N.W.T. 1901, c. 20, s. 103.

19 Ibid., s. 107(I).

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THE EVOLUTION OF THE PERSONAL PROPERTY REGISTRY 49

a single registry that had' to be searched in order to determine if a company hadencumbered its assets. This obviously reduced the transaction costs associated with thefinancing of companies that had assets throughout the province.

The scope of the corporate mortgage registry was later modified in 1929 when newlyrevised companies legislation was enacted. 2

' The original provision provided for theregistration of all corporate mortgages. The new formulation narrowed the scope of thecorporate mortgage registry so that it governed a more limited subset of corporatemortgages. These included a mortgage or charge securing debentures, a mortgage orcharge on uncalled share capital and a floating charge on the property of thecompany.2' This meant that ordinary chattel mortgages and assignment of book debtsgranted by a company were again registerable in the chattel security registry.

This change forced a searching party to conduct a search of two different registriesin order to determine if a corporation had granted a security interest in its property.First, a search of the chattel security registry22 was needed in order to disclose theexistence of conditional sales agreements, chattel mortgages and assignment of bookdebts granted by the corporation. Second, a search of the corporate registry was neededin order to reveal the existence of a floating charge or a mortgage or charge securinga debenture.

A benefit of this system was that it tended to segregate long-term credit transactions(as would typically be found in a mortgage debenture) from short-term credittransactions (as would generally be the case with conditional sales agreements or chattelmortgages). 23 Registrations in the corporate mortgage registry were perpetual and norenewal was required. In contrast, registrations in the chattel security registry had to berenewed every three years. Although a renewal requirement was desirable in the caseof short to medium term credit, it was undesirable in the case of long term financingtransactions.

2 The Companies Act, 1929, S.A. 1929, c. 14, ss. 87-89.

21 The corporate mortgage provisions implicitly drew a distinction between a chattel mortgage and

a mortgage securing debentures as well as between a floating charge and a fixed charge with alicence to deal. Although one might have expected these distinctions to have produced aconsiderable volume of litigation, this did not prove to be the case. Perhaps this was attributableto the practice of multiple registration in doubtful cases.

22 Once the vehicle registry was established, it became necessary to conduct a search of this registryas well if the collateral fell within the definition of an itinerant machine.

23 Prior to the creation of the corporate mortgage registry, a hybrid system had been created in 1907to address the renewal problem associated with corporate debentures. The mortgage securingdebentures was not required to be renewed if it were filed with the secretary of joint stockcompanies, who was required to keep an index of such registrations. Of course, the disadvantageof this system was that a searching party needed to undertake two searches in order to determineif the assets of a corporation were encumbered. See The Bills of Sale Ordinacne O.N.W.T. 1898,c. 43, s. 18(2) and (3), as am. by S.A. 1907, c. 5, s. 10. This system was abandoned upon thecreation of the corporate mortgage registry in 1922.

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B. THE VEHICLE REGISTRY

The movement of goods from one registration district to another poses a problem.The original registration in a different registration district is of no assistance to a partywho searches in the registration district into which the goods have been relocated. Thechattel security statutes addressed this problem by imposing a re-registrationrequirement on the secured party. Upon learning of the relocation of the goods, thesecured party was given thirty.days within which to re-register in the new registrationdistrict. A searching party was therefore exposed to the risk of loss if property had beenremoved from another registration district provided that the secured party was unawareof that fact.

The automobile possesses two unique characteristics: it is highly mobile and itmaintains a relatively high resale value in the market for used goods. The lattercharacteristic makes it an ideal form of collateral. The former poses acute difficultiesfor both registering parties and searching parties who operate within a decentralizedregistration system. One solution to this problem is to create a central vehicleregistry.24 This was the path taken by Alberta in 1951 with the establishment of thevehicle registry." A conditional sales contract or chattel mortgage that covered a motorvehicle was required to be registered with the registration clerk in the Motor VehicleBranch. This eliminated the need for multiple registrations and multiple searches indifferent registration districts.

The vehicle registry was a manual system. A file card was prepared for everysecurity agreement or encumbrance that was registered. The file card was indexedaccording to the last four digits of the serial number and bundled with other file cardshaving the same four digit combination. When the registration clerk received a searchrequest, the clerk would search through the bundle of file cards having the same fourdigit combination and look for a registration that matched the full vehicle descriptionand serial number.26

The creation of the vehicle registry provided searching parties with an additionaladvantage. Security agreements registered in the vehicle registry were indexed by serialnumber. A search using the serial number therefore disclosed security interests grantedby the current owner, and also revealed any security interests that may have been given

24 It is not the only solution to the problem. Article 9 of the Uniform Commercial Code provides that

an Article 9 filing is not required where the collateral is subject to a state certificate of title statute.Certificate of title systems are widely utilized in the United Sates for automobiles, boats and otherforms of mobile goods. See G. Gilmore, Security Interests in Personal Property, vol. I (Boston:Little, Brown, 1965) at 550-578 (description of state certificate of title statutes and theirrelationship to Article 9); 1. Davies, "The Negotiability of Motor Vehicles in England and NewZealand: A Conundrum for the Common Law" (1995) 16 N.Z.U.L.R. 275 (comparing certificate

of title systems with asset registration systems).25 An Act to Amend the Bills of Sale Act, S.A. 1951, c. 7; An Act to amend the Conditional Sales Act,

S.A. 1951, c. 15.26 The vehicle registry is described in further detail by 1. Murray, "Note on Personal Property

Registration Branch" in R.S. Nozick, Cases, Notes and Materials on Commercial Law, 3d ed.(Edmonton: University of Alberta, 1983) 248.

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by a prior owner of the motor vehicle.27 However, a search of the vehicle registry bydebtor name could not be undertaken since only the serial numbers were indexed andavailable as a search criterion.

The vehicle registry was expanded to encompass additional types of mobile goods.The exploitation of oil in the province gave rise to a new registration problem as oil-well drilling equipment migrated around oil-producing portions of the province. Theexpanding commercial use of aircraft created similar problems. In 1953, the motorvehicle registry was widened so as to cover oil-drilling equipment, trailers andaircraft.2" Aircraft and trailers were eventually required to be registered by serialnumber. 9 However, oil-drilling equipment did not possess a unique serial number, andtherefore these registrations continued to be indexed in the vehicle registry using thename of the debtor.

C. THE CENTRAL REGISTRY

The final phase in the centralization of the registries occurred in 1966 with theenactment of the Chattel Security Registries Act. 30 The Act abolished the system ofregistration districts and, in its place, established a central registry located inEdmonton.3" The statute did not unify the three registry systems; the corporate mortgageregistry and the motor vehicle registry remained outside and unaffected by thelegislation.

The central registry introduced an automated registration and search system. Theactual security documents that were submitted for registration were microfilmed andreturned to the registering party. A synopsis setting out the type of registration, theparties, the nature of the collateral and the amount secured was prepared by the registrystaff. The synopsis was then given a code based on the characters in the name. Asearch of this microfilm was automated so that a scanner stopped whenever the codeof the name being searched matched with the code associated with a registration. Theoperator then conducted a visual inspection to determine if the name searched matchedthat of a registration. If it did, a copy of the synopsis was provided to the searchingparty.32 If the searching party wished to examine the security agreement, a furthersearch of the microfilmed records was required.

27 A search of the chattel security registry could only be undertaken using the debtor name as the

search criterion. This would not disclose a security interest that had been granted by a person otherthan the debtor.

28 An Act to Amend the Bills of Sale Act, S.A. 1952, c. 17; An Act to Amend the Conditional SalesAct, S.A. 1952, c. 17. The legislation used the term "itinerant machine" to refer to the classes ofmobile goods which fell within the vehicle registry.

29 An Act to Amend the Bills of Sale Act, S.A. 1971, c. 9, s. 2 amending S.A. 1952, c. 17. An Act

to Amend the Conditional Sales Act, S.A. 1971, c. 18, s. 2 amending S.A. 1952, c. 17. Prior to this,security interests in aircraft and trailers were indexed by debtor name in the vehicle registry.

30 S.A. 1966, c. 12.31 Ibid., ss. 5, 7. Although the statute provided for branch offices where the documents could be

tendered, the registration was not effective until these were transmitted to Edmonton and assigneda registration number.

32 See N. Nichols, "Nichols: Comment on the Registry System" in Nozick, supra note 26 at 246.

One of the problems with centralization is that access to the registry becomes more

difficult for distant registering and searching parties. Remote parties who wish to search

a central registry may be subject to substantial delay when registering by mail or the

expense of traveling to the central registry to expedite a registration. However, as the

costs of speedy communication decline, the benefits of centralization dominate. A

revolution in telecommunications made near instantaneous communication between

distant locations a possibility, and the barriers which impeded centralization quickly

disappeared. The central registry was established during this period. The central registry

took full advantage of this new technology by establishing a series off branch offices

where out-of-town parties were able to register and search by tele-type.

IV. COMPUTERIZATION AND CONSOLIDATION OF THE REGISTRIES

The co-existence of three separate, centralized registry systems, although

understandable, was a less than utopian state of affairs. Multiple registries entail

multiple searches. A searching party would often need to undertake as many as four

separate searches (the three provincial registries and the federal Bank Act security

registry). There was also uncertainty in some cases as to which registry was the proper

place for registration. This led to the practice of dual or multiple registrations.

This problem obviously could be solved by consolidating the registries into one

unified and centralized registry system. It was at the technical level that implementation

of this solution presented problems, since it required the conversion of records and the

integration of different registration rules and procedures. An initial step towards

unification occurred in 1983 with the computerization of the records in the central and

vehicle registries.33 The central registry contained approximately half a million

registrations. The synopses relating to these registrations were manually converted from

microfilm to computer database in an astonishing display of brute secretarial power.

The same approach was not used in relation to the vehicle registry as there were

approximately 2.2 million motor vehicle cards on file. Instead of converting the existing

records, the manual system was phased out over three years by requiring new

registrations and renewals to be updated to the computer database.34

The 1983 amendments also introduced the financial interest statement - the

precursor to the PPSA financing statement. A registering party was required to prepare

a financial interest statement giving details of the security agreement. " The financial

interest statement was then submitted with the security agreement for registration. This

effectively transferred the responsibility for preparing a synopsis of the information

from the registry staff to the registering party.

Although the registries were located in the same building and served by the same

computer, the central registry and the vehicle registry were not actually unified in any

33 Chattel Security Registries Act, S.A. 1983, c. C-7.1.34 The computerization of the registries is briefly described by Ian Murray in Nozick, supra note 26

at 249.35 Chattel Security Registries Regulation, Alta. Reg. 133/84, s. 17.

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real sense. Separate registrations and separate searches were still required. A securedparty who took a chattel mortgage covering trucks and cattle had to register a financialinterest statement covering the cattle in the central registry and a financial intereststatement covering the trucks in the vehicle registry. Equally, a search of the centralregistry using the debtor name would disclose the registration covering the cattle, butnot the registration covering the trucks.

The ideal of "one big filing system"36 was finally realized after the coming into forceof the Personal Property Security Act in 1990. The 1983 amendments to the ChattelSecurity Registries Act had anticipated the eventual enactment of the PPSA, and hadbeen designed to facilitate the transition from the old system to the new. Thecomputerization of the records in the central and vehicle registries ensured that this datawas in a form that could be readily absorbed into the new Personal Property Registry.

A more significant transition problem involved the corporate mortgage registry. Thedocuments contained in the registry spanned a period of more than seventy years. Manyof the registrations were stale. In many cases, there had been corporate reorganizations,amalgamations or changes in name. Conversion was not thought to be a feasible option,and so it was decided to phase out the corporate mortgage registry over three years."The onus was on the registrant to re-register under the PPSA before the three yearperiod expired. This period ended on October 1, 1993, and this date therefore marks thewhen a single, centralized provincial registry was finally achieved.

A major innovation introduced by the PPSA was the concept of a notice registrationsystem. The pre-existing chattel security registries were all built upon a document filingconcept which required the actual security documents to be filed at the registry. Undera notice registration system, the security agreement is not filed. Instead, a financingstatement is registered. This document sets out only the essential details of thetransaction. Here, too, the transition was made less difficult because of the 1983amendments. Registering parties were already accustomed to completing a document(the financial interest statement) that was not unlike a financing statement. The biggestchange in procedure was that the registering party was no longer required to submit thesecurity agreement for registration.

V. THE MOVE TOWARDS A PAPERLESS REGISTRY SYSTEM

When the PPSA first came into force in Alberta, it utilized a paper-based registrationsystem. In order to effect a registration, a party was required to submit a prescribedform of document, called a financing statement, to the registry in Edmonton. Theregistry staff would then input the information contained on the financing statement to

36 This expression was used by Gilmore, supra note 24 at 465. This ideal was never ultimately

realized in the United States. A significant number of states maintained some variation of adecentralized local filing systems. As a consequence, there are more than 4200 separatelysearchable UCC filing systems in the United States. See L.M. LoPucki, "Computerization of theArticle 9 Filing System: Thoughts on Building the Electronic Highway" (1992) 55:3 Law &Contemp. Prob. 5 at 16.

37 PPSA, supra note 1, s. 75(3).

the computer database. However, the legislation, from the outset contemplated thatregistration in the future might be effected electronically from remote locations. Thedefinition of "financing statement" covered a printed financing statement, but alsoextended to "data authorized under the regulations to be transmitted to an Office of theRegistry." 8

In November 1991, the Registry commenced a pilot project under whichapproximately twenty customers were given computer access to the Registry database.This permitted the customer to search the database, but did not initially permitelectronic registration of a financing statement. The pilot project was a success andremote access to the database was extended to 337 clients in August 1992. In January1994, the Registry permitted registrations to be effected by remote registration, and onOctober 1994 remote amendments and discharges were permitted through the electroniccommunications system.

The online registration and search capability was a development of fundamentalimportance. A lawyer or employee of a financial institution could register, amend ordischarge a registration and could search the computer database from his or her office.Jurisdictions which implemented this feature soon found that the vast majority ofsearches and registrations were occurring through the electronic communicationssystem.39 Searches and registrations could be undertaken more quickly than in the past.There were also considerable efficiency gains, since electronic registration eliminatedthe need for the registry staff to manually input the data from a printed financingstatement into the computer database. Although not contemplated at the time, remoteregistration also put into place a critical element needed for the privatization of theregistry.

Although an electronic registration system produces an almost instantaneous abilityto register and search, there are also some costs associated with a paperless system. Theresolution of a priority competition may turn on proof of the perfected status of asecurity interest at a particular point in the past. A search of the registry will disclosethe original registration and will also show any subsequent amendments made to theregistration. However, if the registration lapses or is discharged, it is purged from thecomputer database and a search of the registry will obviously not reveal thisinformation. Before the advent of electronic registration, every financing statement andfinancing change statement was microfilmed. It was therefore possible to reconstructa lapsed or discharged registration by following its paper trail. An unfortunate by-product of a paperless registration system is that this procedure is no longer availablewhere the electronic communications system is used.

3 Ibid. at s. l(l)(p).For example, in British Columbia 90.5 percent of the registrations and 90.7 percent of the

registrations were effected using the remote electronic communications system in 1995. See

Minutes of the 1996 Canadian Conference on Personal Property Security Law - Provincial

Updates. Statistics are not available for Alberta since Alberta registry officials have notparticipated in the Conference since privatization of the registry.

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THE EVOLUTION OF THE PERSONAL PROPERTY REGISTRY 55

VI. PRIVATIZATION OF THE REGISTRY

In December 1992, Ralph Klein took over as premier of the province, and on June

15, 1993 the Klein government was elected. In the throne speech, a radical program of

deficit elimination, debt reduction and privatization was announced. 40 Responsibility for

the registries was transferred from Justice to Municipal Affairs. The operation of the

Personal Property Registry computer, Perpis, together with the computer information

systems for the Land Titles Office, the Corporate Registry, the Motor Vehicles Registry

and Vital Statistics were contracted out to SHL Systemhouse Inc. under a seven yearcontract. 4

The delivery of registry services to the public was privatized on February 1, 1994.

These services covered non-electronic registrations and searches. Prior to this date,

govermnent employees (the registry staff) were responsible for entering the data

contained on printed financing statements into the computer database. The registry staff

were also responsible for processing searches, which could be requested by mail, fax,

telephone or in person. These functions were contracted out to private registration

agents. This transfer of responsibility was part of a much larger plan which involved

the privatization of a vast range of government registry services. The private agents

were also given responsibility for driver's licences, motor vehicle licensing, corporate

searches, land titles searches, vital statistics (including marriage licences and birth and

death certificates) and hunting and fishing licences. There are approximately 225

registry agencies in the province, with about thirty each in Edmonton and Calgary.

Privatization immediately resulted in a significant increase in the price of services.

For example, the average price in Edmonton for a debtor name search increased from

$5.00 to $9.28, and the price of a PPSA registration with a three year registration life

rose from $12.00 to $20.29.42 Users of electronic communications system (Alberta

Online) were unaffected by privatization and continued to register and search

electronically under the prior fee structure. Not surprisingly, registry agents began to

covet the registration and search activity that parties could undertake on their own

behalf through Alberta Online. The government responded initially by putting a

moratorium so that no new access to Alberta Online could be obtained. Of course, this

had the effect of creating a significant barrier to entry by imposing higher costs on new

credit grantors and law firms.

The imposition of a moratorium was not well received by the practising bar and

other frequent users of the system. The moratorium was subsequently terminated.

However, in order to appease the registry agents, the government froze the registry

services provided through Alberta Online by stipulating that any new offering of

registration services would be provided exclusively by the private registry agents. Writs

4 See Alberta Hansard (30 August 1993) at 4.41 W.H. Hurlburt, "Developments in the Land Titles System" in Canadian Bar Association/Law

Society of Alberta Newsletter (Sept/Oct 1994) at 12.42 These figures are based upon an August 1, 1995 telephone survey of twenty registration agents

located in Edmonton.

ALBERTA LAW REVIEW

of enforcement were the first victim of this policy. A sensible approach would havebeen to permit online registration by the lawyer who obtains the writ. Instead, thelawyer must take the more costly and time-consuming step of having it registeredthrough a private registry agent. Rather than producing efficiency gains, privatizationappears to have produced rent-seeking behaviour on the part of private registryagents.43

Another unsettling feature of the privatization concerns the issue of legal liability forerrors. Prior to privatization, there existed a sharp distinction between printed financingstatements delivered to the registry and remote registration through the electroniccommunications system. In the former, a printed financing statement was delivered tothe registry and data entry was undertaken by the registry staff. The registry was liablefor loss caused by an error in entering this information into the computer database, andan assurance fund was established to meet such claims. If electronic registration waschosen, the registering party had no claim against the assurance fund for any systemfailure that caused an error in transmission of data."

Since privatization, the issue has become more complex. If a printed financingstatement is submitted to the registry agent, the position is no different than in the past.The problem arises when registry agents offer value-added services to their customers.This may occur if a registry agent agrees to accept information in a form other than aprinted financing statement. It may also occur if a registry agent agrees to assist acustomer in assembling the information that is to be registered. These activities do notfit easily within the liability regime set out in the PPSA. Although the PPSA insulatesregistry employees and officials from liability for loss, this provision might reasonablybe restricted to cases where the registry agents are acting in their usual capacity.45

VII. THE FUTURE OF THE PERSONAL PROPERTY REGISTRY

We have observed, in Alberta, a progressive centralization and consolidation of theregistry systems until the ideal of "one big filing system" was ultimately realized. Asimilar process occurred in other Canadian provinces which enacted a PPSA. However,when this collection of provincial PPSA registries is viewed from a nationalperspective, it becomes apparent that many of the attributes of a decentralized registrysystem are present. The major difference is that it is now the provinces which comprisethe individual registration districts. Should we predict that the same tendency tocentralization will take hold and result in a single personal property registry systemorganized on a national level? I suspect that this will not occur, at least not in theforeseeable future.

43 Rent-seeking is the expenditure of resources to search out existing monopoly rights or to lobby

for the creation of new monopoly rights." Section 52(1) of the PPSA gives a person a cause of action against the Registrar to recover any

loss caused by an error or omission relation to a printed financing statement. Section 52(4) barsall other actions against the Registrar or an office or employee of the Registry.

4 Where no printed financing statement is submitted to a registry agent, no action against theRegistrar will lie under section 52(1) of the PPSA. The issue then will be whether the registryagent will nevertheless be able to avail itself of the protection in 52(4).

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THE EVOLUTION OF THE PERSONAL PROPERTY REGISTRY 57

The transition to a national system would not be easy. The present provincial registry

systems vary widely. There is a fundamental difference in the collateral descriptioncontained in the Ontario registry and that found in the other provincial registries. Even

among provinces that use the same model Act, there are significant differences in the

information that is required to be registered. Perhaps the greatest impediment to a

national registry system is that it would require a major effort on the part of the federal

government and the provinces to coordinate their efforts in an area in which the federal

government has virtually no technical expertise. There are also some disadvantages

associated with a national registry system. For example, a national registry would

greatly magnify the problem of similar names. A search of the name Joseph Smith

under a national registry system would disclose all similarly named debtors from coastto coast.

In the past, centralization produced considerable efficiency gains by reducing the

amount of time and effort needed to conduct multiple registration and searches in

several jurisdictions. Remote registration and access has greatly reduced the cost of

multiple registration and searching, and therefore the benefits of centralization are

simply not as great as they once were. A more likely scenario is a movement towards

uniformity in the format of financing statements. The development of a standard form

financing statement and search request would permit the same data entry to be used to

electronically register or search in several different provincial registries. This would

further reduce the cost of undertaking multiple registration and searches. Furthermore,there presently exists an umbrella organization under which such efforts might beundertaken."

The decision to privatize the personal property registry may prove to have serious

and unanticipated ramifications. The registry, immediately prior to privatization, was

rapidly undergoing a metamorphosis all on its own. The overwhelming majority of

registrations were effected through the electronic communications system. The majority

of searches were also conducted through this means. In a sense, the registry was

privatizing itself.47 This process has been retarded by the absurd policy decisions which

accompanied privatization, such as the restriction on the kinds of registrations that can

be effected through the electronic communications system.

Perhaps a greater threat comes from the government's attitude that privatization has

freed it from any burden of responsibility for the registry. There is no longer any

46 The Canadian Conference on Personal Property Security Law ("CCPPSL") was established in

1991. Its membership is made up of provincial registry officials, government policy analysts and

legal academics. The original goal of the CCPPSL and of the Western Canada Personal Property

Security Act Committee which it replaced was to produce a model PPSA which could be adopted

by provinces wishing to reform their chattel security law. This task is largely finished and the work

of the Conference is increasingly directed towards achieving uniformity or harmonization at the

operational level.47 During this period there was a significant reduction in the registry staff as the need for the manual

inputting of data diminished. Prior to the PPSA, there were 110 registry staff. Upon the coming

into force of the PPSA this had been reduced to approximately sixty. By 1992, the number had

been further reduced to fifty.

inclination to take an active role to improve the operation of the system or to coordinateefforts with the other provinces. 8 There is a serious possibility that the present registrysystem will become ossified. This would be a most unfortunate development. There areexciting possibilities on the horizon. British Columbia is on the verge of implementinga second generation algorithm which will significantly improve the close similar matchcapability of the registry.4 9 New Brunswick has moved to a completely paperlessregistry system. Alberta, which traditionally has been on the forefront of suchdevelopments, appears no longer to be a player. We should be saddened to see this finetradition wither away.

4 Registry officials from Alberta no longer participate in the Canadian Conference on PersonalProperty Security Law. The government no longer supports the production of the RegistryInformation Guide (1992), which is still widely used notwithstanding that it is badly out of date.The government also has discontinued a consultative process in which input was obtained fromfrequent users of the system with a view to improving the delivery of service.

4 The close similar match capability provides a searching party with registrations that closelyapproximate the search criterion used in a search. For example, a search using Rodney Smith willalso disclose Rod Smith and Roderick Smith. The Alberta registry system currently uses theNYSIS algorithm, which has the tendency to also disclose as similar matches names that are onlydistantly related to the search criterion. See R.C.C. Cuming & R.J. Wood, Alberta PersonalProperty Security Act Handbook, 2d ed. (Toronto: Carswell, 1993) at 336-38.

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